The equilibrium level of GDP occurs at the level of GDP at which the
A) aggregate quantity demanded equals the aggregate quantity supplied.
B) aggregate demand curve becomes vertical.
C) unemployment rate is zero.
D) All of the above answers are correct.

Question

Quizplus · Accepted Answer

The equilibrium level of GDP occurs where the aggregate quantity demanded equals the aggregate quantity supplied. This is the point where the economy is producing at its full potential and there is no excess supply or demand. Option B is incorrect because the aggregate demand curve does not become vertical at the equilibrium level of GDP. Option C is also incorrect because the equilibrium level of GDP does not necessarily correspond to zero unemployment.

The Equilibrium Level of GDP Occurs at the Level of GDP